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Friday, November 6, 2015

Discharge of Real Estate Mortgage



Mortgage is discharged only upon full payment of indebtedness. Up to what extent of the indebtedness? Aside from principal and stipulated interest, does it cover legal interest on the stipulated interest due, attorneys fees, and costs of suit?

This issue was resolved by the Supreme Court in Sps. Adelina Cuyco vs. Sps. Renato Cuyco [G.R. No. 168736, April 19, 2006].

In this case, the deed of mortgage did not contain a stipulation that the legal interest on the stipulated interest due, attorneys fees, and costs of suit must be paid first before the mortgage may be discharged. May the real estate mortgage be discharged upon payment only of the principal and the annual interest stipulated in the deed?

The Supreme Court answered in the negative.

Section 2, Rule 68 of the Rules of Court provides: "SEC. 2. Judgment on foreclosure for payment or sale. If upon the trial in such action the court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and other charges as approved by the court, and costs, and shall render judgment for the sum so found due and order that the same be paid to the court or to the judgment obligee within a period of not less than ninety (90) days nor more than one hundred twenty (120) days from the entry of judgment, and that in default of such payment the property shall be sold at public auction to satisfy the judgment."

Based on the foregoing, the mortgaged property may be charged not only for the mortgage debt or obligation but also for the interest, other charges and costs approved by the court. According to the Court, to discharge the real estate mortgage, the debtor (mortgagor) must pay the creditor the total amount due which includes the principal loan, the stipulated interest, the interest on the stipulated interest computed from the filing of the complaint until finality of the decision less partial payments made, the legal interest on the total amount due from finality until fully satisfied, the reasonable attorneys fees, and the costs of suit. If the debtor fails to pay within the period prescribed, the mortgaged property shall be sold at public auction to satisfy the judgment.
Posted by barops at 1:18 AM
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